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Comprehensiv Risk Platform strengthens culture of risk awareness

New solution that empowers the entire organisation to operate in enterprise risks and opportunities.

Vattenfall has developed an Enterprise Risk Management (ERM) process that incorporates all categories of risk in a comprehensive quantitative model. The process was made possible by building the ERM solution on the OpRiskManagement Solution, developed by SAS Institute.

It was jointly implemented by SAS Institute and Vattenfall in just under four months. The current objective is to link each business process to the risk management system and to raise risk awareness throughout the organisation.

– The critical factor in selecting SAS Institute was their capacity for analysis, focus on risk, as well as the fact that SAS Institute invest considerably in R&D, says Dan Mansfeld, Risk Manager of Vattenfall Group Risk Management.

The project team, comprising people from both SAS Institute and Vattenfall, managed to launch the ERM solution in just under four months, even though implementation, in part, was undertaken during the holiday season.

– One contributing factor to the  project’s success was to start with the already in detail defined processes. Now, with the SAS platform in operation, we can manage change more easily, incorporating new risk areas step by step, says Dan Mansfeld.

The reason for using the SAS Institute OpRiskManagement Solution for ERM development is the fact that Vattenfall, in spite of their tradition of focusing on risk management and security issues, lacked a comprehensive model and method framework for managing all kinds of risk. 

Dan Mansfeld was tasked with improving risk management. This evolved the introduction of an ERM strategy and implementation of supporting processes throughout the whole of Vattenfall. The foundation was the formulation of an ERM vision in response to the question: “What is important to Vattenfall from a business perspective?” The ERM        approach was intended to support the Vattenfall business model and ensure a structured assessment of business risks.

When the issue of IT support was brought up, Vattenfall started with the ERM vision they had developed and asked themselves what platform would be required in order to support that vision. They did not want a tool that would only solve individual problems, but a solution that would provide the management and the directors with comprehensive support for their decisions. They also wanted other functions, besides risk management, to benefit from the platform, thus creating a joint platform for risk, as well as strategy and follow-up.
So the Vattenfall criteria for evaluating the system described a standard solution, a comprehensive platform that could be used for other processes, besides risk. It had to provide powerful and flexible support for reporting and act as a strong quantitative analysis tool. In addition, the solution had to link easily with other systems.

– The fact that ERM is a fairly young evolving field made us want to develop a long-term solution, so it was important for us to see a potential for expanding and developing the platform, says Dan Mansfeld.

Customer benefit
Presently, the SAS solution acts as a joint platform for identifying risks, collating preventive measures and, when necessary, formulating action plans. Additionally the solution includes a complete organisational structure as well as a workflow feature between a number of different roles, e.g. unit managers, risk coordinators who validate the quality of the reporting and manage central functions, and risk experts who contribute to risk assessment. All in all, the system currently has around 200 users, with an option of further expanding that number. What are the roles and responsibilities of the users, and do they control their own system access rights? Everything is transparent and traceable, making it easy to see who did what in the system.

– Every unit manager reports and follows up on their respective risks. Their task is to assess potential risks within their own field. What are the threats against their respective targets? How probable is the realization of each risk and what are the potential consequences?
The unit managers update their reports as often as they deem necessary, but at least once every quarter, and the reports are compiled quarterly, Dan Mansfeld tells us.

The ERM solution encompasses a large number of diverse risks divided into the following six areas: Technology, Infrastructure, Personnel and Organisation, Politics and Society, Law and Regulations as well as Market and Financial. The following constitutes a selection of the risks being managed: political risk, operational risk, environmental risk, liquidity risk, interest risk, currency exchange risk, credit risk, energy price risk, property risk, fuel price risk, investment risk, volume risk and price range risk. The next step will be the implementation of support for incident and crisis management as well as project risk management. 

Risk management – a question of culture
According to Dan Mansfeld, the greatest challenge is changing the culture – not in order to eliminate risk altogether, but to be aware of the risks being taken.

– The awareness of risks and opportunities must be second nature to all employees, and part of their everyday operations. Risk assessments must be an integral part of choosing which projects to run. In addition, we must provide a safe corporate culture in which managers are encouraged to report on all potential risks within their respective field, without feeling that their decisions are being questioned. Of course, what those managers do in order to manage their risks is also important and must be followed-up continuously, says Dan Mansfeld.

Dan Mansfeld feels that risk management must be closely integrated with the business plan, linked to strategies and business decisions, and form part of regular reporting and follow-up – it must simply be seen as part of normal operations. The ERM process should also lead to raising the awareness in Vattenfall's management and board of directors of various risks and improving their follow-up of risk developments.

– ERM is a strategic tool for navigating the right route, avoiding pitfalls and finding the best path. By using ERM, we identify, analyse, assess, follow up and take measures against risks, he says.

Moreover, Dan Mansfeld sees great potential in using the ERM platform for other processes as well; arguing that in the long-term, it will create large synergies and replace certain other IT systems.

– Not many other business processes are as comprehensive as the ERM process. Currently the ERM platform is a place where we have created a complete organisational structure with legal entities and business lines throughout the whole of Vattenfall. Considering that, it is of incredible strategic importance to us, he says. 

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Vattenfall - ERM - Risk Platform

To integrate and standardize risk management processes and systems to holistically understand enterprise risks and opportunities supporting the development of a culture of risk awareness throughout the global organisation of Vattenfall. Another challenge was to establish IT support for the risk management process that could be used for other functions besides risk management.
The introduction of a joint risk management process for the entire Vattenfall organisation, supported by a comprehensive ERM platform, based on SAS Institute's OpRiskManagement Solution. The SAS solution also manages Vattenfall's risk analysis and information needs.

Vattenfall's ERM platform provides more focus on risk throughout the organisation, reduces costs of risk management and helps create synergies between different units.

The energy industry. Vattenfall is the fifth largest electricity producer and the largest producer of energy for heating in Europe. The energy industry is plant intensive and heavy on investments, requiring long-term planning while maintaining a state of flexible readiness. .
"The awareness of risks and opportunities must be second nature to all employees, and part of their everyday operations."

                    - Dan Mansfeld
                        Risk Manager,
                        Vattenfall Group
                        Risk Management